ETF Battles: VEA Is the Incumbent—But Is AVDE the Upgrade?

Well, international stocks are the spice that might be missing from your investment portfolio. And if the outperformance of international stocks over US this year doesn't yet have your attention, then allow me to awaken you from your slumber. Developed international stock ETFs are sizzling, and they've been sizzling by a wide margin.

Today's ETF battle is a head-to-head contest between Avantis and Vanguard. So, who wins? Well, let's find out right after this. I'm Ronda Legy. It's great to see you again. You're watching season 6 of ETF Battles. Keep your awesome ETF Battle suggestions coming. We've had some great matchups.

Send me your ETF ticker symbols in the comments section below and make it good. We could do double, triple, and quadruple headers. Also, be sure to check out the description section. We've got a link to our program sponsor direction. Get in touch. direction.com is where you go for all things leverage and inverse as well as single stock ETFs. Link to those mag seven stocks including Apple and Nvidia and Tesla direction.com. Get in touch.

Also, we've got program resources or viewer resources for our program viewers including free ebooks as well as other good things down there. So don't miss it. So today's ETF matchup was requested to us by a viewer named Ibraim. Ibraim is a loyal viewer and he wanted to see a matchup between international equity ETFs tracking them from Avantis. We've got ADVE and Vanguard VA. And this is an interesting matchup and certainly one that we can do and helping us to sort through the mecca of madness.

We've got Mike Akens with ETF Action and Aan Ferris with Bloomberg. Two of the best in the ETF business. Guys, great to see you. Well, thanks for that intro. Nice to see you guys. Yeah, great to see everybody. Thanks for having me, Ron.

So, we're going to go through our four battle categories and give each one of you an opportunity to weigh in. We've also got our mystery battle category where you can pick a mystery factor or thing that you feel is crucial. You can also nominate wild card ETFs. We'll see if our judges come up with any. And keep in mind none of the battle outcomes are ever predetermined and known in advance by myself or our judges.

So the first category is cost. And we're going to start with Aan. Please get us started. Great. Well, I don't think of any category where you're going to beat Vanguard on cost, right? That's just the reality. is three basis points versus 23 basis points for the Advantis product. That said, 23 bips for active, they're almost essentially becoming sort of like the Vanguard-esque inactive because that is pretty cheap in and you know where sort of the average fee in the whole industry breaks.

But overall you can't you know these are massive products 156 billion in the Vanguard one almost seven in the Avantis which is also really impressive but overall three is just basically free. So that's just it's too much of a gap to not give this to Vanguard. Thank you very much, Ethan. That's a strong start. Mike, you're up next. How do you see it?

You bet. I mean, I always say anytime we do these cost battles and Vanguard's involved, the other issuer is bringing a knife to a gun battle. So there's just no beating it. I don't have anything to add. It's it's basically free access to international markets via the Vanguard product. But definitely Avantis is a very lowcost product. I mean just think of that you're getting active management in a tax efficient rapper for 23 basis points to not the US markets but to international markets.

You just can't replicate it. The ETF rapper is undefeated when it comes to cost and efficiency and that's all I would add to that. But yes, VA is my winner. Exposure strategy is our next category. Mike, you're still up. So break it down for us.

Yeah. So I mean these products are extremely similar, right? I mean, VA owns the market capitalization of a developed world. Avantis targets the market capitalization of a developed world, but then applies some multifactor screening on an ongoing basis to generate generally kind of a little bit of a value tilt, a little bit of a size tilt to that overall, but it's not active in terms of stock selection as you'd traditionally think of it. It's not going and getting a concentrated portfolio of their best picks. It's basically trying to optimize that process of creating a more efficient access by screening on an ongoing basis across that universe.

So the strategies are incredibly similar. Tracking error I would say is going to be very very small between these two funds. They have been historically it will be going forward. So you're just kind of playing on the edges a little bit. And the question is, does that constant refinement by Avantis get you 20 basis points of value? And we'll talk about that in the next segment.

But when it comes to my winner in this category, I actually like applying a lowcost ongoing filter to the market. It can create some value over the long term. You're not paying a significant amount for it. So I do think within this international large cap space while not a huge amount of value is going to be added through it I think there's enough there to potentially overcome that basis point. So I'll give the win to AVDE on exposure strategy overlaying their quant strategy on top of that area of the market. Thank you for that contrarian opinion Mike. It's quite refreshing.

Aan you're up next with your opinion. Give us your analysis. International is definitely one of the areas where you could maybe see some value add from active. And like Mike was saying, this is not super concentrated. So, you're still getting about 3,000 holdings in both of these ETFs. So, they're both very, very broad. You have a value tilt. You're getting a little bit size tilt like Mike mentioned in the Advantis one.

Your top weights are going to be country weights are going to be about the same. It's Japan, it's the UK, it's Canada. The only difference is you're getting Korea in the Vanguard fund. you're not getting that in advantage. It might not matter that much. It's only a 3% weight, but just something to keep in mind about sort of country definitions.

You do get a little bit of differences in some of the sector bets because of the tilts, right? So, you tend to end up being more overweight banks with Avantis and Pharma, which that stuff has actually worked out well right now. But so you do have a little bit of a factor bias, a little bit of a sector bias, but overall it seems like for that little tracking error gap that Mike had mentioned, they're they're getting a lot of juice out of that. So I like that and I think I think it's an area that I like active management. So again, very close, both very wellrun. You're getting a lot of the similar country exposures, but I think you give going to give the edge here to the Avantis product.

Well, that takes us next to performance and eighth in Europe. So, how do these two ETFs compare? Something you mentioned in the beginning is that how International has been doing really well. So, with either one of these, you're hitting all-time highs in these ETF. So, you you you would have been great with either one of them, but you're you are seeing the Aventist products start to separate away from it.

So, it's beating the Vanguard one on a year to date, a one year, a three year, a 5year, pick any date, it's starting to really sort of have some separation there. So you're seeing that even for that 20 basis points difference in fee, you're getting some meaningful outperformance. And I think that goes back to how active tends to work a little bit better in these markets. So with that, I think it's just hard to argue on the performance aspect for that.

Advantis has a advantage here and it's really starting to get some separation off of just the Vanguard one. So I will give performance to the Avantis product. All right. Very good. And when that performance happen happens that's referred to correct me judges if I'm wrong as al alpha is that correct that alpha is that that's the alpha and omega that's Greek isn't it yeah it is is is all right the beginning and the end that's right and when it doesn't happen we we refer to it as alalfa it should be alpha but I call it alalfpha great job on that one Uh Mike, you're up next. Break it down for us in terms of performance between these two ETFs. How do you see it?

Yeah, I really can't add a lot. I mean, the 135 since inception all goes to Avantis. So, no matter how you're looking at it on performance basis, it has eaked out additional returns. You know, 300 basis points on the one here. And that's that's significant in terms of overcoming its 20 basis point additional expense ratio.

I guess I can add in since you want to go down the the stats, you know, on the three-year it's got an alpha of 1.08% relative to VA. You know, it's got up capture in line, but a significantly lower down capture at only 94%. So, it's really picking up that alpha, if you will, in the last three years on that downside capture. Which might be a little bit more of that defensive tilt, a little bit that value.

But in general, the, you know, it's got a pretty good track record. it's not brand new. It's done it consistently. So your information ratio is a 0.52 which is your consistency of outperformance. It's a pretty impressive figure within the ETF space for a category as large as this. So I think you know I got to give the the nod to the team over at Vantis on putting together and to this point managing a very good product. That takes us next to our mystery battle category where our judges could pick a single or multiple factors that they think are meaningful for today's contest. So, Mike, what is